Europe April benzene contract fails to settle

01 April 2010 12:23  [Source: ICIS news]

LONDON (ICIS news)--The European April benzene contract has failed to settle yet because some of the players involved in the negotiations were in different time zones, market players said on Thursday.

“We have a number in mind, but last night it was still uncertain if this would be followed,” a supplier said. “We will continue to talk later today, when the US wakes up.”

Downstream players were eager to find out at what level the April contract would settle, and several rumours cited the price at €883/tonne, or $1,190/tonne. This would represent an increase of €142/tonne, or $191/tonne from March.

Sources had expected a steep hike after a continued increase in spot numbers in recent weeks. A hefty premium was noted especially for prompt material after it transpired some players, who had gone short in anticipation of a longer market, suddenly needed to buy while the market had turned out to be tighter than expected.

This resulted in a premium of $50-80/tonne for prompt material over material with any later delivery date.

On 30 March, the day identified by most players as the main starting point for negotiations, deals for delivery at any time in April were agreed at $1,130-1,180/tonne CIF (cost, insurance, freight) ARA (Amsterdam, Rotterdam, Antwerp).

Meanwhile, a trade for prompt delivery was concluded later in the day at $1,250/tonne, representing a premium of at least $70/tonne.

Up until Wednesday, sources were still uncertain if the premium for prompt material would be included in negotiations.

Some said it was obvious the market would fall later in April, since downstream shutdowns were planned in the spring and some imports were also expected to arrive. This was proved by the backwardation that was seen into May, they argued, and therefore the prompt deals should not be included in the talks.

Others said the starting point for the negotiations would be “the weighted average as usual.”

But if the $1,190/tonne level turns out to be correct instead, it would prove the average of deals done as the most influential factor in the negotiations.

The expected increase was likely to provide downstream markets with difficulties. “Any big increase will kill off demand - the market will not be able to swallow such major hikes,” one styrene consumer said.

Meanwhile, on Thursday morning spot levels continued to rise, partly due to high energy prices and a flurry of buying interest, and April deals were reported at $1,190-1,220/tonne CIF ARA. May values were pegged much lower at $1,120-1,145/tonne.

The March contract had been agreed at $999/tonne or €741/tonne FOB (free on board) NWE (northwest Europe).

($1 = €0.74)

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By: Madelon Ten Cate
+44 20 8652 3214

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